A MONEY.NET PROPERTY

A-B C-E F-I J-O P-R S-Z Abbreviations

This glossary is designed to outline common terms and calculations used throughout our web site. Some calculations may vary from one quote provider to another.

P - R

P/E RATIO — Price of a stock divided by its earnings per share.

PAID-IN SURPLUS — See: Capital Surplus.

PAPER DEALER — A securities dealer specializing in commercial paper.

PAPER PROFIT — An unrealized profit or loss on a security still held. Paper profits and losses become realized (and taxable) only when the security is sold.

PAR: — (1) Face value or principal value of a bond, typically $1,000 per bond. (2) A bond trading in the market at its face value. (3) Face value of a preferred stock on which book value, liquidating value and dividend payments are based; typically $100 per share. (4) The stated value of common stock used primarily for bookkeeping purposes. It has no relationship to market value.

PARITY — Equality between a convertible security's price and the value of the underlying stock if converted.

PARTICIPATING PREFERRED — A preferred stock which is entitled to its stated dividend and also to additional dividends on a specified basis upon payment of dividends on the common stock.

PARTNERSHIP — A non-taxable entity in which each partner shares in the profits, losses, and liabilities of the partnership. Each partner is responsible for the taxes on its share of profits and losses. See Limited Partnership.

PASSED DIVIDEND — Omission of a regular or scheduled dividend.

PASSIVE INCOME — A category of income, for tax purposes, consisting of income (or losses) generated by limited partnerships and rental activities.

PENALTY BID — A term used to refer to a syndicates bid to stabilize the price of a new issue in the after market. See Stabilization.

PENALTY PLAN — See: Contractual Plan.

PENNY STOCKS — Low-priced issues, often highly speculative, selling at less than $1 a share.

PERIOD CERTAIN — An annuity policy which assures a minimum number of annuity payments to the annuitant (or beneficiaries).

PERSONAL PROFPERTY — Assets not considered real estate.

PHANTOM INCOME — Non-cash income on which taxes must be paid. For example, accreted interest on an OID Corporate Bond.

PHILADELPHIA AUTOMATED COMMUNICATION AND EXECUTION (PACE) — Automated Order Execution System found on the Philadelphia Stock Exchange. See: Automated Order Execution System.

PINK SHEETS — The interdealer, wholesale quotes for over-the-counter stocks that are published daily.

PLACEMENT RATIO — A statistic published in the Daily Bond Buyer. It is the ratio of the par value of new issues sold (placed) compared to the total par value of new issues that came to market during a one week period.

PLAN COMPLETION INSURANCE — A low cost, declining term insurance policy purchased by the owner of a contractual plan. Should the owner die, the insurance policy will pay the policy's amount to the custodian bank for the purpose of completing the contractual payments.

POINT — In the case of shares of stock, a point mean $1. If ABC shares rise 3 points, each share has risen $3. In the case of bonds a point mean $10, since a bond is quoted as a percentage of $1,000. A bond which rises 3 points gains 3 per cent of $1,000, or $30 in value. An advance from 87 to 90 would mean an advance in dollar value from $870 to $900. In the case of market averages, the word point means merely that and no more. If, for example, the Dow-Jones Industrial average rises from 870.25 to 871.25, it has risen a point. A point in this average, however, is not equivalent to $1.

PORTFOLIO — Holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks, and other securities.

PORTFOLIO INCOME — Also investment income. A category of income, for tax purposes generated by investments in securities. Portfolio income consists of dividends, interest, and capital gains.

POSITION LIMIT — The limitation established by the listed options exchanges that prohibits an investor from having a position of more than an established number of option contracts of the same security on the same side of the market.

POSITIVE YIELD CURVE — The curve formed when plotting yield vs. maturity during a period when short-term yield (interest rates) are lower than long-term yields. This is the typical curve during periods of easy money and loose credit. It is also called an ascending or normal yield curve.

POWER OF ATTORNEY — See: Trading Authorization.

PRE-EMPTIVE RIGHT — The right of a shareholder to retain his percentage ownership of a corporation. When new shares of a corporation are to be sold, current shareholders are given the opportunity to purchase additional shares. This enables them to maintain the same proportional ownership as they had prior to the new issue. See: Rights.

PREFERRED STOCK: — (1) A class of stock with a claim on the company's earnings before payment may be made on the common stock and usually entitled to priority over common stock if the company liquidates. It is usually entitled to dividends at a specified rate when declared by the Board of Directors and before payment of a dividend on the common stock. (2) Accounting measure carried at par on the books of the corporation.

PRELIMARY PROSPECTUS — See: Prospectus.

PREMIUM: — (1) A bond trading in the market above its face value. (2) The amount a bond's current price exceeds its face value. (3) The amount a bond's redemption price exceeds its face value. Known as the "call premium". (4) The market price of an option contract set by supply and demand. (5) Fee paid an insurance company for an annuity policy.

PRE-REFUNDED — See: Advanced Refunding.

PRE-SALE ORDER — An order placed with a municipal new issue syndicate prior to the time the syndicate actually wins the issue. This type of order is usually given the highest priority by the syndicate.

PREVIOUS CLOSE — The last price a stock traded at during the previous trading day.

PRICE-EARNINGS RATIO (P/E) — A popular way to compare stocks selling at various price levels. The PE ratio is the price of a share of stock divided by earnings per share for a twelve-month period. For example, a stock selling for $50 a share and earning $5 a share is said to be selling at a price-earning ratio of 10.

PRICE SPREAD — An option spread position in which the strike prices of the options are different, but the expiration dates are the same. Also called a Vertical or Money Spread.

PRIMARY DEALER — A dealer in government securities with whom the Federal Reserve will conduct open market operations.

PRIMARY DISTRIBUTION — Also called primary or public offering. The original sale of a company's securities.

PRIMARY EARNINGS — "Undiluted" earnings per share. See: Earnings per Share.

PRIMARY MARKET — The market for new issues or underwritings. (vs. Secondary Market). See: New Issues.

PRIME RATE — The lowest interest rate charged by commercial banks to their most credit-worthy and largest corporate customers. Other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.

PRINCIPAL: — (1) The face value or par value of a debt instrument. (2) A transaction in which a security firm buys or sells for its own account (vs. Agent). See: Dealer. (3) In general a person's capital, or the amount invested.

PRIVATE ACTIVITY BONDS — A category of municipal bonds. The interest on which may (or may not) be taxable for Federal income tax purposes.

PRIVATE PLACEMENT — See: Regulation D Offering.

PRODUCTION — Another term for the public offering price of a new municipal issue.

PROFIT-TAKING — Selling stock which has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices.

PROGRESSIVE TAX — A tax that takes a larger fraction of the income of high-income people. The best example is the graduated income tax.

PROPRIETORSHIP — An unincorporated business owned by one person who is entitled to all income (or losses) of the business and responsible for all taxes and other liabilities of the business.

PROSPECTUS — The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement filed with the Commission. It warns that the issue has not been approved (or disapproved) by the Commission and discloses such material information as the issuer's property and business, the nature of the security offered, use of proceeds, issuer's competition and prospects, management's experience, history, and remuneration and certified financial statements. A preliminary version of the prospectus, used by brokers t obtain indications of interest from investors, is called a red herring. This is because of a front-page notice (printed in red ink) that the preliminary prospectus is "subject to completion or amendment" and "shall not constitute an offer to sell…" PROXY — Written authorization given by a shareholder to someone else to represent him and vote his shares at a shareholders' meeting.

PROXY STATEMENT — Information given to stockholders in conjunction with the solicitation of proxies.

PRUDENT MAN RULE — An investment standard. In some states, the law requires that a fiduciary, such as a trustee, may invest the fund's money only in a list of securities designated by the state (the so-called legal list). In other states, the trustee may invest in a security if it is one which would be bought by a prudent man of discretion and intelligence, who is seeking a reasonable income and preservation of capital.

PUBLIC HOUSING AUTHORITY (PHA) — Municipal bonds issued by local housing authorities to build low income housing. The bonds are secured by the revenues of the local authority and are further secured by the U.S. Government acting through HUD (Department of Housing and Urban Development). These bonds have not been issued since 1974, but since they had original maturities of up to 40 years, they will continue to be available in the secondary market. They are also called NHA's (New Housing Authority Bonds).

PUBLIC INFORMATION OFFICE — A facility of the new York Stock Exchange that answers inquiries from individual investors on various aspects of securities investing. Major areas of inquiries involve: finding local brokerage firms that take small orders or accounts, explaining investing methods, and providing instructions for tracing dubious securities.

PUBLIC OFFERING — See: Primary Distribution.

PURCHASE AND SALES DEPARTMENT (P & S) — A department in a brokerage firm responsible for trade and customer confirmation. Liaison with clearing corporation for clearance and settlement activities.

PURCHASING POWER RISK — The risk that, because of inflation, the money returned form an investment will not be worth as much as the original amount invested (the returned dollars will not purchase as much as the original invested dollars).

PUT BOND — A bond which can be redeemed at the holder's option on a specific date or dates.

PUTS AND CALLS — See: Option.

PYRAMIDING — The practice of using unrealized paper profits in stock trading for making addition commitments.

QUALIFIED LEGAL OPINION — Conditional affirmation of the legal issuance of a municipal bond issue. For example, if there is a lawsuit seeking to block a new issue, the bond counsel will analyze the situation. If he believes there may be a basis for the suit, he would issue a qualified opinion that expresses doubt as to the outcome of the lawsuit. A non-qualified opinion has no reservations concerning the issuance of the bonds.

QUALIFIED PLAN — A retirement plan (or annuity) into which tax deductible contributions are made and invested. The investment's earnings are tax deferred. Taxes are paid only when money is withdrawn. Keogh Plans, IRA's, and most corporate pension plans are qualified.

QUICK ASSETS — Those current assets which can be converted to cash very quickly. Defined as current assets less inventory. See: Acid Test Ratio.

QUICK ASSET RATIO — See: Acid Test Ratio.

QUOTE — The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you ask your broker for a "quote" on a stock, he may come back with something like "45 1/2." This means that $45.25 is the highest price any buyer wanted to pay and that $45.50 was the lowest price which any seller would take at the same time. A market maker is obligated to purchase or sell a minimum quantity if the quote is "firm". A nominal quote is one in which the market maker is not obligated to trade at the prices quoted.

RALLY — A brisk rise following a decline in the general price level of the market or an individual stock.

RANDOM WALK — A theory which assumes that the future price movement of a security can not be predicted from past price movement (directly refuting technical analysts' use of charts as a method of forecasting stock prices). In effect, the theory argues that prices move in a random pattern and that they are no more predictable than the waling pattern of a drunken person.

RATE COVENANT — A revenue bond issuer's commitment to maintain rates at a level sufficient to produce of specif8ed debt service coverage.

RATING — Evaluation of credit risk of securities by an established rating service such as Moody's, Standard & Poors, or Fitch.

REALLOWNACE — In a new corporate issue, the amount received by a broker/dealer which is not a member of the syndicate or selling group.

REAL ESTAT INVESTMETN TRUST (REIT) — An organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REIT's are required to distribute as much as 95% of their income.

REAL PROPERTY — Real Estate; land and/or buildings.

RECAPTURE — The reclamation by the IRS, of tax deductions or credits previously taken by a taxpayer. In particular depletion, accelerated depreciation; tax credits are subject to recapture.

RECEIVERSHIP — A form of bankruptcy in which a court-appointed person (receiver) manages the affairs of the business.

RECLAMATION — The process whereby securities, once already accepted at settlement, are returned because of non-deliverable form. See: Good Delivery, Rejection.

RECORD DATE — The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.

RECOURSE LOAN — A note or loan signed by a limited partner, for which the signer is personally responsible ("at risk"). Recourse loans are included in the partner's basis for tax purposes. See: Basis.

REDEMPTION: — (1) Repayment of a debt security at or before maturity (2) Repayment or a preferred stock. (3) Sale of mutual fund shares to the fund sponsor.

REDEMPTION PRICE — For bonds and preferred stocks. See: Call Price. For Mutual Funds. See: Net Asset Value.

RED HERRING — See: Prospectus.

REFINANCING — Same as refunding. New securities are sold by a company and the money is used to retire existing securities. The object may be to save interest costs, extend the maturity of the loan, or both.

REFUNDING BOND — Issuance of a new bond issue for the purpose of retiring an outstanding bond issue.

REGIONALS — The exchanges at which options trade, including the Chicago Board Options Exchange (CBOE), American Stock Exchange Options (ASOP), Pacific Exchange Options (PSOP), and Pacific Exchange Options (PHILOP).

REGISTRED: — (1) A certificate in which the name of the owner is recorded on the books of the issuer. It can be transferred only when endorsed by the registered owner. (vs. Bearer). See: Certificate. (2) A security which has been issued in compliance with the registration requirements of the Security Act of 1933. See: Registration Statement.

REGISTERED COMPETITIVE MARKET MAKER — A member of the New York Stock Exchange who trades on the floor for his own or his firm's account and who has an obligation, when called upon by an Exchange official, to narrow a quote or improve the depth of a existing quote by his own bid or offer.

REGISTERED OPTIONS PRINCIPAL (ROP) — An individual who supervises registered representatives regarding options account activities.

REGISTERED REPRESENTATIVE — The man or woman who serves the investor customers of a broker/dealer. In a New York Stock Exchange member organization, a Registered Representative must meet the requirements of the Exchange as to background and knowledge of the securities business. Also known as an Account Executive or Customer's Broker.

REGISTRAR — Usually a trust company or bank charged with the responsibility of keeping a record of the owners of a corporation's securities and preventing the issuance of more than the authorized amount.

REGISTRATION STATEMENT — Before a public offering may be made of new securities by a company, the securities must be registered under the Securities Act of 1933. A registration statement is filed with the SEC by the issuer. It must disclose pertinent information relating to the company's operations, securities, management, and purpose of the public offering. Before a security may be admitted to dealings on a national securities exchange, it must be registered under the Securities Exchange Act of 1934. The application for registration must be filed with the exchange and the SEC by the company issuing the securities. It must disclose pertinent information relating to the company's operations, securities, and management.

REGRESSIVE — A tax which taxes low income persons more heavily as a proportion of income, e.g. a sales tax 9vs. Progressive Tax).

REGULAR WAY DELIVERY — The normal industry standard for settlement. Unless otherwise specified, most securities sold are to be delivered to the buying broker by the selling broker and payment made to the selling broker by the buying broker on the fifth business day after the transaction. Regular way delivery for government securities and options is the following business day. See: Settlement.

REGULATION A OFFERING — A type of new issue which is partially exempt from the filing provisions of the Securities Act of 1933. The exemption is given if the issue is a maximum of $1,500,000.

REGULATION D OFFERING — Private Placement: A type of issue which is sold by the issuer directly to investors without the use of an underwriter. The size of the issue is not limited, but its sale is limited to a maximum of thirty-five non-accredited investors.

REGULATION G — The federal regulation governing the amount of credit which may be advanced by a financial establishment other than a broker or bank to a customer for the purpose of purchasing securities.

REGULATION T — The federal regulation governing the amount of credit which may be advanced by brokers and dealers to customers for the purchase of securities.

REGULATION U — The federal regulation governing the amount of credit which may be advanced by a bank to its customers for the purchase of listed stocks.

REINVESTMENT RISK — The risk that an investor in bonds who chooses to spend the interest, or is unable to reinvest the coupon payments, will not receive the calculated yield to maturity. Yield to maturity assumes the reinvestment (or compounding) of interest.

REJECTION — Refusal to accept securities in non-deliverable form on settlement date. See: Good Delivery, Reclamation.

RELATED PORTFOLIO ORDER — An order placed by a syndicate member on behalf of a Unit Investment Trust its sponsors.

RELATIVE STRENGTH INDEX (RSI) — An oscillator that compares the price of a security relative to itself. The RSI is based upon the difference between the average of the closing price on up days vs. the average closing price on the down days over a given period.

 
Chart Keys:
Period: 14

REOFFERING — The yield at which a municipal new issue will be offered to the public. (Based on current market conditions.)

REORGANIZATION: — (1) The financial restructuring of a company in bankruptcy. See: Bankruptcy. (2) The department within a brokerage firm which handles mergers, conversions, etc. Sometimes simply called Reorg.

RESISTANCE — The upper bound of an established trading range where selling pressure tends to cause the price of a stock to decline (vs. Support). See: Overbought.

RESOLUTION: — (1) Another term for indenture. See: Indenture (2) See: Corporate Resolution.

RESTRICTED ACCOUNT — A margin account in which the equity is below the initial FRB equity requirement.

REPURCHASE AGREEMET (REPO OR RP) — A transaction usually associated with the activities of the Federal Open Market Committee (FOMC). The FOMC buys securities (T-bills) from a non-bank dealer and the non-bank dealer agrees to repurchase them a short time later at a pre-determined price. Also known as a Repo or RP.

RESERVE REQUIREMENT — The federal regulation that governs the percentage of deposits which a bank must keep in reserve. The remainder of the deposits are available for loans.

RESTRICTED STOCK — Stock which was not registered under the Securities Act of 1933. Stock purchased through a company's stock option plan or a private placement will be unregistered. The purchaser will sign a letter agreeing that the purchase is for investment and not a short-swing profit. The holding period for restricted stock is two years. Sale of restricted stock is covered by Rule 144. See: Rule 144, Letter Stock, Short Swing Profit.

RETAINED EARNINGS — The profits which a corporation does not payout in dividends. They are kept by the company to help finance expansion. Also known as earned surplus.

RETIREMENT: — (1) End of employment. (2) Repayment of debt obligation.

REVENUE ANTICIPATION NOTE (RAN) — A short-term municipal security used by a municipality to help its cash flow. They have a maximum maturity of one year and repayment is based on certain anticipated revenues of the municipality.

REVENUE BOND — A bond issue which is secured by a pledge of the revenues of the specific project.

REVENUE BOND INDEX — The average yield (on a particular day) on twenty-five selected revenue bonds with thirty year maturities. It is computed on Thursday afternoon and published in the Daily Bond Buyer on Friday.

REVERSE REPO — The opposite of a Repurchase Agreement. Also called a matched sale.

REVERSE SPLIT — A stock "split" in which the number of outstanding shares is reduced. See: Split.

REVERSIONARY WORKING INTEREST — An arrangement in an oil and gas limited partnership in which the limited partners bear all expenses. The general partner's claim on revenues is subordinated to the limited partner's until the limited partner's costs are reimbursed. Also known as a subordinated working interest.

RIGHTS — When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder.

RIGHTS OF ACCUMULATION — The ability of "related" mutual fund investors to pool their combined purchases to meet breakpoints See: Breakpoint.

RISK — The chance of loss on an investment due to many factors including, inflation, interest rates, default, politics, foreign exchange, call provisions, etc.

RISKLESS TRANSACTION — See: Simultaneous Transaction.

ROLLOVER — See: IRA Rollover.

ROUND LOT — A unit of trading or a multiple thereof. On the NYSE the unit of trading is generally 100 shares in stocks and $1,000 or $5,000 par value in the case of bonds. In some inactive stocks, the unit of trading is 10 shares.

RULE 144 — Provides for the sale of restricted stock and control stock. Filing with the SEC is required prior to selling restricted and control stock. The number of shares which may be sold is limited.

RULE 15c3-1 — The SEC rule which establishes minimum net capital requirements for brokers/dealers.

RULE 15c3-3 — Known as the Customer protection Rule. It requires a broker/dealer to establish a special reserve account for the protection of its customers. It also requires a broker/dealer to have custody or control of certain customer securities.

RULE 405 — NYSE's "Know Your Customer" rule.

RULES OF FAIR PRACTICE — NASD rules relating to a broker/dealer's transactions with the public. Every exchange and securities association has a similar set of rules.